KUALA LUMPUR: CIMB Equities Research is retaining its Neutral outlook on the Malaysian telco sector, which is trading at a 9% discount to the Asean average FY18F EV/OpFCF (enterprise value/ operating free cashflow) of 18.3 times.
It said on Wednesday that mobile competition is stabilising with some telcos trying to better monetise, which could see the industry returning to low-single-digit revenue growth next year.
“FY17-18F yields are decent at 3.23.6%. Our top pick and only Add is Axiata. We have Hold ratings on Maxis, Telekom and Digi. Key upside/downside risk: competition eases/intensifies significantly,” the research house.
CIMB Research said the industry mobile service revenue rose 1.6% on-quarter (-0.5% on-year) in 3Q17.
Postpaid revenue growth picked up 3.8% on-quarter (+10.7% on-year), driven by growth in subs on steady average revenue per user (Arpu).
Prepaid revenue stabilised on-quarter, easing only by 0.3%, though still down 9.6% on-year due to intense competition, pre-to-postpaid migration and industry-wide SIM card consolidation.
In the fixed line business, Telekom’s revenue slipped 1.3% on-quarter but rose a mild 0.6% on-year, driven by higher internet and multimedia revenue.
Celcom performed slightly better than peers in 3Q17, with mobile service revenue up 2.0% on-quarter vs. Digi’s/Maxis’s +1.6%/+1.4% on-quarter.
Celcom’s revenue market share (RMS) inched up 0.1% pt to 30.4%. Maxis’s RMS fell 0.1% pt on-quarter to 40.1% while Digi’s was steady at 29.5% after four quarters of decline.
Celcom’s 3Q17 EBITDA jumped 9.2% on-quarter (+20.3% on-year) as margins widened 2.7% pts on-quarter to 41.6% (lower network cost).
Maxis’s EBITDA also rose a robust 8.8% on-quarter (+5.0% on-year) as margins jumped 3.3% pts on-quarter (cost optimisation).
Digi’s EBITDA rose 1.3% on-quarter (-6.3% on-year) with a steady margin on-quarter of 46.3%.
Maxis’s/Celcom’s 3Q17 EBITDA market share rose 0.9%/0.6% point on-quarter to 45.9%/26.3% while Digi’s fell 1.5% pts on-quarter to 27.8%.
Postpaid market activity levels picked up in Sep-Nov with several attractive new promos from Celcom and U Mobile but they were aimed at the higher-ARPU segments.
“The prepaid market stayed active with some new headline-grabbing products and plan enhancements/tweaks.
“However, competition did not substantially intensify. Instead, we noted Digi’s and Maxis’s attempts to monetise. The IDD market was relatively quiet.
“Fixed broadband: Higher level of competitive activities detected There were more marketing activities in the fixed broadband segment in Nov, with TM and Maxis both launching year-end promos.
“Under its Bonanza Campaign, TM’s unifi Advance and Streamyx plan prices were discounted by 24%-44%. Maxis responded by cutting prices on its 10-30Mbps packages by 14%-22% to largely match Telekom's offer,” it said.
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